Notice of Results and Trading Update

RNS Number : 5851Q

Pressure Technologies PLC

21 October 2011

 



Notice of Results and Trading Update

Pressure Technologies plc ("Pressure Technologies" or the "Group") announces that its preliminary results for the year ended 1 October 2011 will be issued on Tuesday, 6 December 2011.

The Group also issues the following trading update in advance of the announcement of the preliminary results:

Expectations for the year ended 1 October 2011

The Group's results for the financial year ended 1 October 2011 will be lower than market expectations. Despite encouraging sales progress, gross profits have fallen due to changes to the sales mix at both Chesterfield Special Cylinders ("CSC") and the Engineered Products Division, as well as marginally lower sales in Chesterfield BioGas ("CBG"). Fixed costs were also higher than the market forecast due, principally, to the write off of acquisition costs and a further investment in commercial and technical staff, budgeted for 2012, being brought forward to 2011.

The balance sheet, however, remains strong and the Group maintains tight discipline in the management of cash flow with year end net funds in line with market forecasts of £2.9 million. The Board, therefore, expects to maintain the level of final dividend for this year.

Current trading and outlook by division

Chesterfield Special Cylinders

Since our last update, the expected significant upturn in CSC's principal market, the supply of high pressure vessel systems ("APVs") for deep water oil rigs and drillships, appears to be underway. CSC has, to date, secured orders to supply APVs to six drillships in 2012 against three for the whole of our 2011 financial year and the pipeline of live quotations remains strong. Lead-time for raw materials is six to seven months and, therefore, the recovery in this market will be, as previously reported, in the second half of the Group's 2012 financial year. Competition in this market has increased, which has had an impact on margins. In response to the changing marketplace, projects are underway to enhance gross margins and reduce fixed costs.

Having gathered valuable customer feedback, the Board is of the opinion that CSC has maintained its technical lead in engineering capability, particularly in system design and product cleaning. We have also seen a return, at good margins, of some of the work lost to low cost competitors in 2010 for more "difficult" to manufacture APVs.

The commercial team has been strengthened to increase our presence in Germany and Eastern Europe. Engagement with current and potential new customers is at the highest level the business has ever seen, suggesting that market confidence is returning to the oil and gas industry, which gives us confidence going forward.

The development of in-situ testing of ultra-large cylinder installations continues and projects have been carried out in the UK, Singapore and Kazakhstan. The BP Macondo accident in the Gulf of Mexico has focused attention on safety standards in the oil and gas industry and we expect this business to grow significantly over the medium term.

Beyond 2012, we expect continued growth in the oil and gas sector and there is already a significant defence order book for 2013.

Engineered Products Division

The Board is pleased at the progress of the Engineered Products Division.  Al-Met had record annual sales in 2011.  The performance of Hydratron, following relocation of the business' three existing UK sites into one modern manufacturing facility, has been consistently good and the order book remains strong.

Hydratron's market position has been significantly helped by the increased focus on safety and reliability in the oil and gas industry, to which it is supplying not only high pressure test equipment but also control panels for safety critical subsea systems. Growth remains in-line with the Board's expectations.

We have revised down our expectations for growth at Al-Met as a result of industry forecasts and customer feedback; this has led the Board to conclude significant growth for wear parts into the subsea market will not now take place until 2013 and we anticipate double digit growth in 2013 and 2014.

The Board's target remains to double the size of this division through organic growth over the medium term and we continue to look for complementary acquisitions to strengthen our position in the supply of high pressure components and control systems into the energy sector.

BioGas

Progress at Chesterfield BioGas ("CBG") has been slower than expected. The announcement of the Renewable Heat Incentive in March 2011 had the desired effect of catalysing interest from the major utilities in biogas to grid ("BtG") projects and CBG is actively pursuing a significant pipeline of projects.

This market is the main driver for sales at CBG and the key issue now is the timing of the receipt of orders; order to delivery and installation of equipment for the BtG market is of the order of nine months. A number of projects are in advanced stages of negotiation but, unless these are converted to orders by December 2011, the contracts are unlikely to be completed during the 2012 financial year. As a result of this, the Board has lowered its expectation of sales into the BtG market from four upgrader units to two upgrader units in 2012.

The medium term prospects for CBG remain good and, encouragingly, our business partner Greenlane® Biogas has experienced a dramatic increase of orders across mainland Europe and North America.

Summary

As a result of the above, while turnover is expected to be in line with market forecasts, the Group will deliver profits substantially below expectations for the year ending 1 October 2011. The balance sheet, however, remains strong and the Group maintains tight discipline on the management of cash flow with year end net funds in line with expectations.

Growth in 2012 will come principally from the Engineered Products Division. CSC is expected to show growth in the second half of 2012 into 2013. Major growth in the biogas business is now expected in 2013 rather than 2012.

The Board is confident in the long term prospects for the Group, as evidenced by its decision to maintain the final dividend for the year just ended.

For further information, please contact:

Pressure Technologies plc John Hayward, Chief Executive James Lister, Group Finance Director	Tel:  [phone] www.pressuretechnologies.co.uk
Rawlings Financial PR Limited Catriona Valentine	Tel:  [phone] www.rawlingsfinancial.co.uk
Fairfax IS PLC Nominated Adviser and Broker Simon Bennett Ewan Leggat	Tel: [phone]

Company description:

Pressure Technologies is an AIM listed, leading designer and manufacturer of speciality engineering solutions for high pressure systems serving large global markets.

The Group's largest subsidiary, Chesterfield Special Cylinders Limited ("CSC") designs, manufactures and offers retesting and refurbishment services for a range of speciality high pressure, seamless steel gas cylinders for global energy and defence markets. The business is conducted under the "Chesterfield" brand which is a long established name in the cylinders and specialised pressure vessel market.  

Chesterfield BioGas Limited was formed in November 2008 following the signing of a co-operation agreement with Greenlane^® Biogas Limited, the world leader in biogas upgrading from raw biogas to vehicle quality fuel, gives Pressure Technologies exclusive rights to market Greenlane^® equipment in the UK and Eire.  Chesterfield BioGas provides turnkey solutions for the cleaning, storage and dispensing of biomethane, produced from waste water treatment and anaerobic digestion of organic waste.

In 2010, the Engineered Products Division was formed following the purchase of Al-Met Limited ("Al-Met") and the Hydratron group of companies ("Hydratron").

Al-Met is a niche manufacturer of specialised, precision engineered valve wear parts used in the oil and gas industries, which was acquired by Pressure Technologies in February 2010.  Its products are used in high-pressure choke and flow control valves, designed to regulate flow volumes in extremely demanding applications in the subsea and surface oil and gas industries.  The business, which was established in 1985, has developed a leading edge capability in precision machining carbides, high grade stainless steels and super alloys. 

Hydratron acquired on 15 October 2010, designs, manufactures and sells a range of air operated high pressure hydraulic pumps, gas boosters, power packs, hydraulic control panels and test rigs.  Hydratron has sales and manufacturing companies in Altrincham, UK, and Houston, USA and a spread of third party distributors in key locations around the world.    Formed in 1981, Hydratron has since established itself as a leading supplier of quality high pressure equipment to the oil and gas industries.  The full range of Hydratron products may be viewed at www.hydratron.co.uk.

 

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